STATEMENT: PA Budget and Policy Center on State of Budget Negotiations

Marc Stier, director of the Pennsylvania Budget and Policy, issued the following statement about the ongoing negotiations over the 2016-17 budget.

“As legislators work towards a final agreement, we at PBPC want to point to three areas where legislators have an opportunity either to make a major advance on behalf of working people and the middle class in Pennsylvania or take a big step backward.

"First, we urge legislators to enact a minimum wage of at least $10.10 an hour. Every dollar in new wages will be spent generating economic activity that benefits every business and community in the state. And at a time when legislators are struggling to find new revenues to balance the budget, that new economic activity will also generate new tax revenues for the state of $121.5 million. In addition, raising the minimum wage will generate another $104 million in savings in reduced Medicaid spending as thousands of Pennsylvanians move from traditional Medicaid, for which the state carries half the cost, to expanded Medicaid, 90% of which is paid for by the federal government. And this revenue, unlike so much that the General Assembly seems to be counting on from gaming and liquor “reform,” are real and recurring. (For more information on this subject, see our blog post here.) 

"Second, we urge legislators not to enact HB1196 in its current form and instead pass a clean bill expanding hours for alcohol sales for the Democratic Convention, as was done in 2000 for the Republican convention. HB1196 will not only reduce the likely revenue from Act 39, it will be one more step towards undermining Pennsylvania’s Liquor Control Board, which regulates and discourages excessive alcohol consumption, provides $500 million plus in revenues to the state, and provides good-paying jobs. We fear that too many in the General Assembly seem motivated primarily by a desire to eliminate those jobs. We believe that well-paid public sector jobs, like the minimum wage, help sustain good paying jobs in the private sector as well, which helps sustain a Pennsylvania with shared prosperity. (For more information on this subject, see our blog post here.) 

"Third, we are concerned about the charter school provision of HB530. The general assembly seems poised to increase basic education funding by a minimal, yet necessary amount. HB530 in its present form will undermine the ability of the School District of Philadelphia to control the growth of charter schools. Under the present rules, every charter school enrollment disproportionately reduces the funds available in district schools. The result will be that much, if not all, of the new funding for basic education in Philadelphia will be eaten up by payments to charter schools. Students in district schools will never see the benefit of new basic funding. In addition, HB530 is an entirely unwarranted intervention in the governance of the Philadelphia School District." (For more information on this subject, see our blog post here.) 


 More detailed breakdown below:

 

MINIMUM WAGE / GAMING REVENUE

 

Ten years ago was the last time Pennsylvania raised the minimum wage in advance of the federal government doing so. In those ten years, inflation has reduced the value of the minimum wage to a poverty wage. That’s why it’s time to raise it again, ultimately to $15 an hour, but immediately to $10.10.

A raise in the minimum wage to $10.10 will help 1.2 million Pennsylvanians who work hard but make less than $10.10 an hour right now. Eighty-seven percent of those affected would be over age 20 (not teenagers).  Eighty-four percent of workers who will be affected by a minimum wage increase have a high school degree or more.  And 30% of affected workers have some college education. 

Raising the minimum wage won’t just help workers who receive it — every dollar in new wages will be spent generating economic activity that benefits every business and every community in the state. 

And at a time when legislators are struggling to find new revenues to balance the budget, that new economic activity will also generate new tax revenues for the state of $121.5 million. (Counties and municipalities that tax sales and wages will also see new revenues.) In addition, raising the minimum wage will and generate another $104 million in savings in reduced Medicaid spending as thousands of Pennsylvanians move from traditional Medicaid, for which the state carries half the cost, to expanded Medicaid, 90% of which is paid for by the federal government.

This total budgetary savings is $225.5 million. And unlike so much else that the General Assembly is considering this week, the savings are real. 

The numbers flying around in the halls of the Capitol for gaming, on the other hand, seem fantastical. We don’t know which gaming proposal will ultimately see the light of day, but given what we have heard, we can confidently say that most of the proposed new gaming revenue comes from the one-time sale of new licenses. Even if the state receives all that is projected —and there are striking examples in the past of those projections being tens of millions too high —legislators will have to come back next year to replace them. And the on-going revenues from internet gaming are entirely uncertain — as is the impact internet gaming may have on reducing revenues from existing casinos.  

Rather than continue to spin fantasies, the General Assembly should to base this budget on reality. And the reality of a minimum wage increase is that it benefits working people who deserve a raise, businesses who will benefit from new consumption, and the taxpayers of the state who will be spared another $225.5 million in tax increases to close the deficit.

 

 

LIQUOR

 

Act 39 flew through the House of Representatives and was signed by Governor Wolf too fast for us, and many others, to object. If we had a chance, we would have pointed out, as the IFO did soon after passage, that the estimates of new revenue from expanding wine and beer sales was way too high. And we would have added that much of the $106 million that the IFO expects will be generated by Act 39 is a one-time deal. Projections of additional sales of wine and beer at the new locations have to be weighed against the loss of sales at Wine and Spirit shops and beer distributors. 

And now, just weeks later, liquor privatizers are at again, loading up a bill to expand alcohol sales at the Democratic National Convention — as was done for the Republicans in 2000 — with a number of other proposals. One of them, a proposal to require discounts secured by the LCB to be passed on to consumers, could cost the LCB, and thus taxpayers, tens of millions.

Proponents of the legislation say, as they always do, that the aim is to benefit consumers. But proposals to modernize the state store system can do that as well. And they can do so without jeopardizing the three key reasons to sustain the system. 

The first is to regulate and discourage excessive alcohol consumption in part by managing prices. Alcohol remains by far the most dangerous drug, legal or illegal on the market. 

The second is to provide the $500 million plus in revenue that the LCB provides to the state.

And the third is to protect good-paying jobs.

All three goals would ultimately be undermined by Act 39.

It’s that third purpose, we suspect, that really motivates the privatizers. And it motivates us, their opponents, as well. Good paying, unionized public sector jobs — like the minimum wage, prevailing wage laws, and laws that protect labor organizing — help sustain good paying private sector jobs. As the middle class gets ever more squeezed in this country, this is not the time to be undermining those public sector jobs. 

It’s fine to be concerned about consumers. But we need to be even more concerned about the wages that allow people to consume. It’s high wages that create an economy in which prosperity is shared rather that concentrated at the top. And we need to be concerned about the taxpayers who will be asked to pay more as LCB contributions to the state decline. 

The emperor’s new liquor stores being pushed by the privatizers may have lower prices. But if we keep taking steps that undermine working class wages and consumption, they might not have customers for anything but expensive wines and single malt scotch. And no one except the 1% will benefit from that. 

 

 

HB530 / EDUCATION FUNDING

As this dispiriting budget season ends, advocates for education could at least be grateful that the General Assembly seems poised to increase basic education funding by $200 million. This is far less than the $400 million necessary to put us on a path towards overcoming massive cuts and the most unequal education funding in the state. And it does little more than help school districts keep up with costs. But at a time when so many legislators are unwilling to find the revenues to invest in anything, it is better than nothing. 

Yet, at least as Philadelphia is concerned, it will all be for nothing if HB530 passes in its current form. That bill would undermine the ability of the School District of Philadelphia to control the growth of charter schools. Yet, under the present rules, every charter school enrollment disproportionately reduces the funds available in district schools. The result will be that much, if not all, of the new funding for basic education in Philadelphia will be eaten up by payments to charter schools. Students in district schools will never see the benefit of new basic funding.

Aside from the funding issue, HB530 is an entirely unwarranted intervention in the governance of the Philadelphia School District. Charters schools may sometimes improve education and may sometimes not do so. The decision about how, when, and where to expand them should be made by those who have the information and expertise to do so in ways that improve education. It is entirely inappropriate for the General Assembly, acting on an ideological commitment to charters schools at all costs — a commitment that has no basis in the research on good education — to override the decision of the Philadelphia School District. 

It would be a shame if one hand of the legislature undoes the good that another hand has done.

 

 

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